JAKARTA: Total underwriting value of equities and bonds this year is predicted to reach IDR100 trillion, repeating last year achievement, as companies is eager to seek financing in capital market.
This year is seen as the best momentum for Indonesian companies to generate fund amidst the strong economic fundamentals and abundant inflow of foreign fund, said PT UBS Securities Indonesia Country Head Rajiv Louis.Total underwriting value of equities and bonds in Indonesia may be between the range of US$3.5 billion and US$5 billion, or IDR31.5 trillion and IDR45 trillion, during the second half of the year.This year, we expect the value may reach IDR100 trillion, it excludes merger and acquisition, he said yesterday.Indonesian market watchdog (Bapepam-LK) recorded that total fund generated from the capital market was IDR49.28 trillion in the first half of the year. It is projected that UBS underwriting will be smaller than that of 2010, which reached IDR113.37 trillion.The underwriting target, as Rajiv added, can be obtained provided that European debt crisis relieves soon, which prevents damage to economy and financial sector in Asian emerging market, including Indonesia. At the same time, it will maintain the national economic growth.The expected low inflation rate this year between 6.3% and 6.8% amidst higher target of gross domestic product is regarded as a catalyst for business expansion and financing of Indonesian private companies.In the last two weeks, capital inflow reached US$500 million, Rajiv said. He looked optimistic that the European debt crisis would not drag Indonesian economic growth significantly. Back to the crisis in 2008 when global financial institutions in the US had liquidity problem, Indonesia could survive.While other emerging markets faced financial problem, which led them to seek fund from abroad, Indonesian capital market grew by 45.96%.The underwriting target of IDR100 trillion is considered as normal, regarding the achievement in the first half of the year, said PT Mandiri Sekuritas Director Kartika WirjoatmodjoIt makes sense to predict underwriting activity at IDR100 trillion this year, because through June it had completed about IDR60 trillion, he said.The lower interest rate compared to bank rate somehow triggers bonds issuance even more.Stocks issuance is more appealing as it is backed by domestic positive sentiment such as conducive macro-economic condition.With solid domestic fundamental, it is understandable if more companies seek fund through capital market as it happens to be the cheapest financing alternative, he said.The momentum of business expansionThis year happens to be the right momentum for market players to expand considering the aggressive domestic growth, said PT Danareksa Sekuritas President Director Marciano Hersondrie Herman.Expansion equals to additional fund. Capital market is perceived as the most proper financing alternative for now since Indonesia is one of potential investment destination, he said.Marciano and Kartika highlighted commodity, retail and consumer goods sectors as sectors that are most appealing for investors. Commodity sector, primarily coal and palm oil will still lead the market in the second half, Marciano added.UBS is now processing stock underwriting, including initial public offering, second offering and rights issue, costing US$1.5 billion in the second half.Rajiv further noted dollar-denominated bond issuance to escalate this year, particularly those issued by export based company or any companies whose capital expenditure are in dollar.The financing cost is cheaper as at the moment global bond coupon is only 4.5% or lower than retail country bond whose coupon reaches 7%, he said.In the first semester of 2011, UBS secured US$6.8 billion transaction, consisting of merger consultancy and US$1 billion acquisition along with stocks and bonds underwriting transaction, costing US$2.9 billion respectively.Such value is attributed by around 10 transactions in the first semester of 2011. The company is currently processing US$1 billion bond issuance.There are 10 more processed transaction. We cannot yet disclose the identity until the final process, he resumed. (t02/t04/msw)
